The Dirty Little Secret Behind Free Conference Call Startups

After catching a bit of the TechCrunch Disrupt live stream this week, I was definitely interested to see the wide variety of startups gunning for the Cup. While I love the idea and design behind Uber Conference, I always have a visceral reaction anytime I hear a call-related startup show up with an amazing service that's free (although to be fair, the execs did mention freemium features). This dynamic is rooted in my two-years-ago curiosity around a widget I've used at various times during my startup adventures: I could never figure out how they offered as many lines as I could chew up for free – not like freemium-driven free, but just damn zero! And that's when I discovered a concept called traffic pumping.


The short version of the story goes like this: there is essentially a fat-ass loophole in the Telecommunications Act of 1996 that allows rural carriers to jack up their "inter carrier compensation fees" over a traditional urban carrier. And when I say jack up, I mean something on the order of 10-20 cents a minute. The original intent was to balance the huge investment needed to build out rural phone systems that will likely never carry enough volume to be self-sustaining. So enter some shady middlemen who aren't even required to maintain a physical presence in these rural areas (think Iowa, South Dakota, etc.); add some poorly written legislation (or perfectly crafted if you're a conspiracy theorist); and boom, you've got a business model that creates amazing free services.


The problem is there's never a free lunch. It might not cost me 6 cents a minute per line to connect my conference call, but who do you think is paying that 10-20 cents/minute juice? You guessed it: wireless and long distance phone companies like AT&T, Sprint, Verizon, etc. And you're the zenith of pollyanna if you can't imagine those charges aren't passed straight along to your bill. Just last week, I (yet again) became sick of my $225 family plan bill with AT&T and shopped some alternatives. The net-net is if you live or travel outside of major cities – where flat-priced services like MetroPCS or Boost Mobile can drive a voice + text + data plan down to ~$45/month – it's damn hard to spend less than $75/month on one phone line. That's insane, and I would contend is driven partially by hijinks like traffic pumping – and in larger part by carrier greediness. I mean seriously, $30/month for an "unlimited family texting plan" that has a cost-of-goods of a small can of Hormel chili? But I digress…


So I really hope that Uber Conference has the stones (and customer adoption stats) to move beyond traffic pumping to book revenue. Plus there are all kinds of legal wranglings involving carriers, states and the FCC, so it's utterly unclear if this gray-hat revenue stream is even going to stand the test of time. According to the thinly veiled pro-telecom research firm Connectiv Solutions, traffic pumping costs wireless carriers more than $190 million annually. Even if the number's half of that, you know the primary thing getting "pumped" is our phone bills.


On a more positive tip, I found Ark to be the most interesting thing I saw given I fundamentally believe the premise they're building something Google or Facebook never will – a people search engine. I'm always amazed that anything people related always ends up at some super-scammy, content-scraping website that's so shady you worry about just hitting the URL. The UI is a bit literal for me (with the left-hand nav bar full of a dozen filters I can manually toggle to create results), but these guys are clearly smart enough to begin to layer in some natural language intelligence that would smooth out the entire UX nicely. That's if they stay independent long enough given their already-deep exit conversations. I really do pull for them to remain free agents as their technology will be much more end-user beneficial without the political overlay they seek to avoid. Viva le Ark!

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